The digital yuan looks ready to hit the cryptocurrency space, while the United States debates whether or not to launch their own digital currency.
A Digital Showdown: Yuan Versus the Dollar
On May 31st, Ray Dalio who is the founder of the billion dollar hedge fund Bridgewater Associates, came out stating that the digital Yaun will be more competitive then the digital US dollar. Dalio expects the yuan market share size to increase roughly 10% – 15% over the next 5 to 10 years. He believes the digital yuan to become a top reserve currency in the coming years. China is the world’s largest trading country, dominating the numbers in exports and imports. Dalio rationalizes that more trade will soon be dominated by the digital yuan. Others don’t believe it to be so revolutionary.
Dalio also highlights that it’s not just China that should boost the value of the digital yuan, but also what the US dollar is doing with regards to inflation. Dalio does not like inflation. The Bridgewater Associates billionaire has previously come out citing his concerns with the inflationary nature of the US dollar and his transition into crypto, which can be read more about here.
Dalio even believes the digital yuan will eventually compete with Bitcoin as an “alternative currency.” The US currently looks to publish plans to discuss the potential issuance of a CBDC. While the United States is debating the creation of a digital currency, China is preparing their digital asset for launch.
The Digital Yuan Gathers Momentum
Regardless of whether or not Dalio is right or wrong about the digital yuan vs the digital dollar, the digital yuan has been gathering some velocity prior to launch. Yao Qian, the former head of the digital initiative at the People’s Bank of China has come out publicly stating that the digital yuan and other digital bank currencies are set to become “smart” and may one day run on blockchain networks like Ethereum.
The former project lead believes that CBDC’s shouldn’t just be regular digital forms of cash, but actually have, at first, very simple smart contract capabilities and functions within them. Smart contracts are code that carry out functions when specific conditions are met. The recent hacks against DeFi exploiting smart contract errors have shaken Qian’s confidence a bit as well, as he states that banks should use a cautious approach and build out complexity and security over time.
Significance of CBDCs
The significance of China launching their own digital currency could be tremendous. The United States has tiptoed into digital finance, only very recently implementing crypto regulation. China, on the other hand, looks to establish themselves in the decentralized finance ecosystem with their own digital currency. The first mover advantage could be a huge determining factor in capturing the global CBDC market share. Time will tell if the digital yuan becomes the massively competitive alternative currency Ray Dalio believes it could be.
The digital yuan is a way for the central bank to digitize banknotes and coins in circulation. The Chinese market is very advanced in cashless payments. The digital yuan would be a way to speed that process up. It will be legal tender in China and no interest will be paid on it.
Source : bsc.news
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